Since the last decade, rare-earth ion doped phosphor materials have gathered growing interests as a consequence of the unique 4f electrons of the dopants. Among rare-earth ions Eu3+, Tb3+ and Dy3+ form red, green and yellow phosphors when they are doped in suitable matrices. Rare-earth doped compounds are extensively applied to lighting, field emission displays (FED), cathode ray tubes (CRT) and plasma display panels. It is well known that the reduction in particle size of crystalline systems in the nanometer regime gives rise to some important modifications of their properties with respect to their bulk counterparts. Two main reasons for the change of electronic properties of the nanosized particles can be identified as: (1) the ‘quantum confinement’ effect due to the confinement of delocalised electrons in a small sized particles, which results in an increased electronic band gap and (2) the increase of the surface/volume ratio in nanostructures, which enhances ‘surface’ and ‘interface effects’ over volume effects. In case of rare-earth ions, the electronic f-f transitions involve localized electrons in atomic orbital of the ions. Therefore no size dependent quantization effect is found in the transitions of rare-earth ions. However, the ‘surface effect’ plays a vital role in the photoluminescence (PL) properties of these ions. From the technological point of view, the resolution of images is dependent on the size of the phosphor materials and smaller particles are favored for higher resolution of optical devices. Although there has been an explosive growth in the synthesis of nanosized materials, it is still a challenge for material chemists to design a process for the fabrication of highly luminescent nanosized materials with high degree of crystallinity.